Task force working to improve Louisiana’s least affordable auto insurance rates in the country

Louisiana has the least affordable auto insurance rates in the country, according to a study by the independent, nonprofit research organization, the Insurance Research Council (IRC).

Since August, members of the Louisiana High Auto Rates Task Force have met multiple times to address the issue and propose solutions.

Louisiana Department of Insurance (LDI) Commissioner James Donelon appointed legislators and industry leaders to look into ways to reform the existing system. They met last month with IRC’s director of research, Victoria Kilgore. Kilgore provided an overview of IRC’s findings from its recent report, “Auto Insurance Affordability: Cost Drivers in Louisiana.”

Louisiana holds the distinction of having the least affordable auto insurance in the country due to two significant factors: the frequency of auto accidents that result in injury claims, and the prevalence of attorney involvement and litigation. The report is based on an analysis of IRC’s closed-claim research and other sources.

Based on the most recent data, Louisiana had the least affordable insurance rates from 2011 to 2015 with an affordability index of 2.64 percent. The affordability index is the ratio of average expenditures on auto insurance to median household income.

“The affordability of auto insurance is an important issue in Louisiana and many other states,” said Elizabeth Sprinkel, CPCU, senior vice president of the IRC. “As policymakers seek to address this issue, it is vital to have an understanding of the cost drivers that underlie variations in the cost of auto insurance for consumers.”

When it comes to auto accidents that result in insurance claims, in 2017, Louisiana had the highest bodily injury liability claim frequency in the country. There were 1.75 claims filed for every 100 insured vehicles, nearly double the national rate of 0.90 claims per 100 insured vehicles.

When it comes to number of Louisiana claimants who hire attorneys and file auto-related lawsuits, Louisianans are 60 percent more likely to file lawsuits than other states’ claimants (16 percent compared to 10 percent nationwide). In 2017, more Louisianans (54 percent) hired attorneys after filing bodily injury claims compared to 48 percent of claimants in other states.

“For too long, Louisiana has earned the dubious distinction of having the most expensive auto insurance rates in the nation,” Daniel Erspamer, CEO of the Pelican Institute for Public Policy, told Watchdog.org. “This report proves that Louisiana’s sue-happy legal climate discourages the growth of jobs and opportunity in our state, while also unnecessarily costing Louisiana working families. If we want to put a stop to skyrocketing auto insurance rates in Louisiana, the first step is to reform our broken legal system.”

Louisiana has again been declared a “judicial hellhole” by the American Tort Reform Association.

Donelon was tasked by the legislature during the 2018 regular session to create a task force and make recommendations to the legislature to revise the existing processes and help lower rates.

“High auto insurance rates have plagued Louisiana families for years, and while we’ve come up with some Band-Aids, we haven’t seen any silver bullet solutions,” Donelon said in a departmental release. “I’m hopeful that recommendations made by this task force will be successful where previous efforts have failed.”

Members of the task force are Rep. Kirk Talbot, chairman; Sen. John Smith, vice chairman; Sen. Wesley Bishop; Rich Piazza, Louisiana Department of Insurance; and representatives from each of the following: Property Casualty Insurers Association of America; American Insurance Association; National Association of Mutual Insurance Companies; Professional Insurance Agents of Louisiana; Louisiana Association of Justices; and Louisiana Motor Transport Association Inc.

After the November meeting, Talbot, with input from the task force members, referred several matters to the Actuarial Working Group headed by Rich Piazza of the LDI, to review in more detail.

The LDI Working Group will evaluate reducing civil jury trial thresholds and creating a system of medical care funds. It will also look into extending Louisiana’s prescriptive period from one to two years, and review existing limitations of non-economic damages (general damages, pain and suffering, loss of consortium) and specific damages (lost wages, medical bills).

The task force suggested enhanced penalties (or other means) be considered in order to discourage distracted driving and hopefully prevent accidents. They also suggested that seatbelt use be considered as a determining factor for assigning negligence.

In order to reduce fraud and better use state resources the task force also asked the LDI Working Group to address inflated medical billing and consider providing rules about the use/collection of proceeds from Collateral Sources to eliminate duplicate collection of benefits.

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